James Hardie and the fight for future asbestos victims

L-R in the above image: Greg Combet (former ACTU Secretary), Bernie Banton, Ken Fowlie

A long way from Wittenoom

For many decades, the deadly legacy of asbestos dust has been claiming innocent victims in Australia. From the early days of asbestos mining at Wittenoom to the more recent saga of building-product manufacturer James Hardie, the legal ramifications continue, as does the suffering.

Since the 1980s, Slater and Gordon has played a lead role in the battle for compensation on behalf of many of the nation’s asbestos victims. Having won landmark cases on behalf of Wittenoom workers, Slater and Gordon again took up the asbestos compensation fight in the early 2000s.

A ‘wildly optimistic’ fund

In 2001, finally acknowledging its role in the rise of asbestos-related diseases amongst its workers, James Hardie set up a foundation to handle asbestos compensation, with a one-off contribution of $293 million.

But as the number of afflicted James Hardie employees grew, it became clear that the size of this compensation fund was, as a judge later put it, ‘wildly optimistic’. When the fund ran dry in 2003, James Hardie refused to add more.

The company’s inadequate contribution to the compensation fund was met with fierce criticism from governments, unions and the media. The unions and pressure groups began a public campaign against James Hardie, claiming that the company had restructured and moved offshore in order to avoid its liability.

Then NSW premier Bob Carr decided to establish a judicial inquiry – which had similar powers as a royal commission – to investigate the situation. He appointed David Jackson, QC, to run it. Beginning in 2004, the inquiry included representatives from James Hardie, victim groups, trade unions and the fund, with the overall objective of accessing how much money was needed to compensate the victims in full and how best this could be achieved.

Slater and Gordon acted pro bono for the Australian Council of Trade Unions and asbestos support groups in the inquiry.

Bernie Banton and the team

As the six-month inquiry unfolded, it became apparent that James Hardie had indeed tried to shirk its responsibilities by establishing a new holding company in the Netherlands and cutting ties with its Australian subsidiaries, which held asbestos-related liabilities.

It was also during the inquiry that the Australian public became familiar with Bernie Banton, the late social justice campaigner and outspoken former James Hardie worker.

A father of five, Bernie had worked as a lathe operator for a James Hardie subsidiary from 1968 to 1974, making asbestos pipe sections and shaping blocks of asbestos for power stations. Now dying from lung disease, this passionate, articulate grandfather was determined to represent those affected by the James Hardie compensation shortfall.

In the midst of the explosive inquiry, the then ACTU secretary Greg Combet said of his fellow negotiator: ‘Bernie has been there every day and has lent to this entire process a decency and humanity that was sorely needed.’

The inquiry found that having pocketed the profits from asbestos product sales, James Hardie had a responsibility to pay all compensation claims, which could total as much as $2.2 billion.

But in the inquiry’s final report, David Jackson, QC, found that although future liabilities for asbestos sufferers were grossly underestimated and that James Hardie had behaved wrongfully, legal action to recover the money would be onerous to all involved.

A new challenge

The findings were handed to Bob Carr, who asked Greg Combet to lead a team to negotiate on behalf of the victim groups to resolve the dispute once and for all.

‘Negotiations were challenging to say the least,’ recalls Slater and Gordon lawyer Ken Fowlie.

Eventually a consensus was reached that the only way asbestos victims and their families could be fully compensated was if James Hardie had the means to do so. The company’s assured viability therefore had to be the cornerstone to any deal being stuck.

This led to the key element of the 2005 agreement: the cash-flow cap, which still stands today. This involves an independent actuary firm assessing the company’s yearly liability based on the estimated number of asbestos victims. James Hardie is then required to meet that obligation through its contribution to the Asbestos Injuries Compensation Fund (AICF), subject to a limit of 35 per cent of its cash flow.

‘This percentage figure strikes a three-way balance of appeasing investors, allowing the company to still prosper and ensuring adequate funds are available to continue compensating claimants now and into the future,’ notes Ken Fowlie.

‘This was a pivotal moment in negotiations that now stands as a landmark agreement in Australia’s history.’

‘A clear message’

In 2012, a High Court ruling found that seven former non-executive James Hardie directors misled the stock exchange about the company’s compensation fund for asbestos victims.

Joanne Wade, head of Slater and Gordon’s NSW asbestos practice, said the ruling put an end to the long-running saga.

‘It will ensure the manufacturers of deadly asbestos products are never allowed to mislead the public about their ongoing commitment and obligations to families devastated by their products,’ she said.

‘Today’s decision sends a clear message to all firms who have made asbestos products over the years: do the right thing by victims or the courts will do it for you.’

Looking to the future

In 2014, with the news that James Hardie had doubled its full-year profit and would pay more than $122 million to the AICF, Slater and Gordon applauded the fact that asbestos victims would continue to have access to compensation.

‘It is pleasing to see James Hardie getting its house in order,’ said Head of Slater and Gordon’s Victorian asbestos practice Margaret Kent.

‘While the company no longer manufactures asbestos, it continues to make profits and a portion of its earnings are redirected into the AICF every year. It doesn’t change the fact ordinary Australians have and will continue to become ill, and even die, from asbestos, but it’s important they provide significant compensation for their wrongdoing.’

The sad reality is that an alarming number of Australians continue to be diagnosed with asbestos-related diseases. With asbestos-related cases not expected to peak until 2020, the suffering is far from over.

In the meantime, the hope for all concerned is that companies like James Hardie will be kept accountable, and that the hard work of so many will help those who need it most in years to come.

Primary source material: Ken Fowlie; Fairfax Media; ABC; lawgovpol.com

View list of common asbestos products